Regarding employee stock options, which of the following is/are true?
A)Firms compute a fair-value-based measure of employee stock options on the date of the grant using an option-pricing model that incorporates information about the current market price, the exercise price, the expected time between grant and exercise, the expected volatility of the stock, the expected dividends, and the risk-free interest rate.
B)Total compensation cost is the number of options the firm expects to vest times the value per option.
C)Firms amortize total compensation cost over the requisite service period, which is the expected period of benefit.
D)The requisite service period is usually the period between the grant date and the vesting date.
E)all of the above

Question

Quizplus · Accepted Answer

All of the options are true statements regarding employee stock options. Firms use an option-pricing model to compute the fair value on the grant date. Total compensation cost is calculated by multiplying the number of options expected to vest by the value per option. This cost is then amortized over the requisite service period, which is usually the period between the grant date and vesting date.

Regarding Employee Stock Options, Which of the Following Is/are True